Luxury spirits company Moët Hennessy has been present in India since 2001 and has been producing a local variety of Chandon (sparkling wine) at its Nashik plant from 2013. Currently, the LVMH group company’s India portfolio consists of champagne (Dom Pérignon, Moët & Chandon, Krug, Veuve Clicquot, Ruinart), cognac (Hennessy XO, Hennessy VSOP and Hennessy VS), vodka (Belvedere), single malt (Glenmorangie, Ardbeg), wines (Cloudy Bay, Casa Lapostolle) and Chandon. In an interview to Forbes India, Jean-Marc Lacave, president and regional MD (Asia Pacific) of Moët Hennessy, says he does not see India as an emerging market anymore and that people here are ready to pay for quality. Excerpts:
Q. What are your readings of the Indian market and its potential for you as a spirits company? Will you create local brands for India?
If you look at the demographics of India, it’s a large market with young consumers… a country where the middle-class is growing and which has a great sense of luxury. It’s also a market where we can make our spirits more visible and accessible to consumers. It’s a complex market, but has big potential. Our business proposal is to promote and develop our luxury brands of wines and spirits, and be the leader in the international luxury brand segment. We don’t have any plans to develop local brands.
Q. Your customer base is well-travelled and buys your products from duty-free stores instead of paying steep prices here due to high taxes. Now, you’re making them available in India. What difference does it make?
We have entered India with a long-term plan. First, we want to make our brands accessible widely in the country. The more you build your brand, the better it is… your visibility increases and builds value [of the brand]. Our job is to create the market. Whisky or vodka is a relatively easy trade because it’s deep in your culture. But with sparkling wine or a cognac now being made available across the country, we are building a culture and creating a moment of consumption. Being present locally helps build awareness and trust in the brand, and thereby, a culture of drinking wine and luxury spirits.
When it comes to high taxes, we cannot control what we don’t control, but what we can do is build our footprint. The variable is return on this footprint. If there were limited amount of regulations and taxes, the return on investment would be quite fast. You need to have a balance and arbitrage between the size of the market and its future potential. Can we go faster in India if the market conditions are different? Yes. But at the end of the day, look at the demographics—it’s a country of 1.2 billion people. It’s a very young, moving, evolving country. The size of the market is much bigger and worth the effort, even if it takes longer.
Q. It took over a decade for you to set up your manufacturing unit in Nashik to locally produce Chandon. Why did it take so long?
We produce Chandon locally in various other countries. But when it comes to whisky, we never produce it locally. With Chandon, it is consistent with the brand philosophy. It took us 40 years to enter the Chinese market; it will take 50 years in Africa. The first footprint of our brands there were in the ’70s, but we really got the benefits in the 2000s, which I believe was still quite fast. Our brands are 250 years old, so what are 10 years? We entered Russia 100 years ago and enjoyed great success there, but later we had problems. That’s life. We live with the business. In my view, 10 years in India have been quite stable and consistent.
Do bear in mind that in the case of most of our brands, we come from a ‘narrow culture’ background. Champagne, cognac, Chandon—we have limited quantities available. So we’re never going to grow by 10 to 15 percent worldwide. We are looking at a 3 to 4 percent growth by volume globally. We simply cannot afford to have one or two markets booming at the same time since it will limit our supplies. Look at what happened when Hennessy sales shot up in China… our supply to the rest of the world had to be controlled. China and India are growing markets. But when China turned a little slow recently, we started to provide more Hennessy bottles to the rest of the world.
Q. What has been your experience of manufacturing in India?
Manufacturing has been quite smooth, to be fair. We are French. We know how to make wines, and it’s not easy. If it was, everybody would be making it. And we are not here only to do easy things. We have worked earlier with Chinese farmers as well. Honestly, this isn’t an easy business. And we have been through a lot of challenges. But we still managed to produce our first bottle in about three years.
Q. Does it normally take three years?
No. But we were on time, according to [our] planning. And in this business, how many times are you on time according to planning? Not very often. It is the sixth time we have produced Chandon locally. We know exactly what our needs are. We know the process. We know the champagne business.
Q. What differences do you notice in Indian spirits consumption habits compared to other countries? Are there any other particular Indian traits that you hear of?
There is quite a big difference in the rate of home consumption versus out-of-home consumption in India compared to the rest of the world. It’s something we need to adapt to. If you consider the US or the UK, for a brand like Belvedere, its consumption is largely in trendy clubs.
Home consumption in Japan doesn’t exist much. But in India, there is more consumption at home and a lot at weddings. So the touch points for our brands here are quite different than in other places.
This is very specific to India compared to other markets even in Asia. For example, aperitifs (quick drink before lunch or dinner) is not at all prevalent in India, while at weddings, it is a big business. Even when it comes to the nightlife in Mumbai or Delhi, considering the size of the city, it is still quite limited.
Q. Is the Indian premium customer a very value-conscious buyer?
Yes, but I would put it differently. People here are ready to pay whatever the price is as long as you have the quality, and you are able to convey this message to the consumer. I don’t really see India as an emerging market anymore, but when we talk about this part of the world, you have two types of markets: One which is very driven by show-offs who want to display expensive wines at the most expensive prices. Of course, you have to give them quality, but they want the name first.
But for Indian customers, they want the name, but the price is a result of the quality. If you give them the quality, they are ready to pay for it. For true luxury brands like us, I feel more comfortable in that territory, providing quality and then having people pay for it. Just to put a tag and say I am the most expensive, therefore I am quality—no, that’s not what we believe in. And that is not always proven.
So yes, the Indian consumer is a value buyer, but he needs to be assured of a quality product first.
Q. Was producing Chandon in India a different experience?
We were amazed to see the pride in Indians to produce an internationally branded product locally. That’s what surprised us more than anything… their affinity to an international name, the image of LVMH [the French multinational luxury goods conglomerate which was formed by the merger of Louis Vuitton with Moët Hennessy], Chandon, and the commitment to develop the product. It’s something that perhaps we had underestimated a little. Even the consumers were equally excited.
We talk about China and the pride of Chinese—in our experience it wasn’t as much as Indians.
Our team was very happy to put India on the map of Chandon and be a part of this worldwide diaspora of Chandon. There has been a considerable reaction among consumers, our teams and trade about it. We were expecting it, but not at the level we got.
Q. What gave you the confidence to begin manufacturing in India?
We knew whisky and spirits are produced locally. But we have the wine expertise. And beyond the confidence, we try to behave as a leader. It’s an important market here and we need to go beyond the tax regulations and recognise the opportunity here. If you find a way to produce locally, I believe it’s a good way to promote your brand to consumers and be true to our brand. We will never do whisky locally. We are doing Chandon because it’s a multi-site brand.
Q. What sells the most in your Indian portfolio?
Hennessey Cognac sells the most, and then the champagne (Moët Chandon) Hennessy is our biggest brand.
Q. What do you drink personally?
I am a big Glenmorangie original fan. I like it on the rocks… you just cannot resist it.
(This story appears in the 13 November, 2015 issue of Forbes India. To visit our Archives, click here.)